Steel Dynamics, Inc. Just Released Its Full-Year Earnings: Here's What Analysts Think
Steel Dynamics, Inc. (NASDAQ:STLD) shares fell 7.4% to US$30.75 in the week since its latest annual results. Results were roughly in line with estimates, with revenues of US$10b and statutory earnings per share of US$3.04. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
See our latest analysis for Steel Dynamics
Taking into account the latest results, the current consensus, from the eleven analysts covering Steel Dynamics, is for revenues of US$10.0b in 2020, which would reflect a measurable 4.5% reduction in Steel Dynamics's sales over the past 12 months. Statutory earnings per share are expected to sink 13% to US$2.65 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of US$10.1b and earnings per share (EPS) of US$2.59 in 2020. So the consensus seems to have become somewhat more optimistic on Steel Dynamics's earnings potential following these results.
There's been no major changes to the consensus price target of US$36.21, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Steel Dynamics at US$46.00 per share, while the most bearish prices it at US$28.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Steel Dynamics shareholders.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Steel Dynamics's past performance and to peers in the same market. These estimates imply that sales are expected to slow, with a forecast revenue decline of 4.5% a significant reduction from annual growth of 8.4% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 4.2% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect Steel Dynamics to grow slower than the wider market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around Steel Dynamics's earnings potential next year. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Steel Dynamics. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Steel Dynamics analysts - going out to 2024, and you can see them free on our platform here.
It might also be worth considering whether Steel Dynamics's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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